WA budget 2017: Tax hikes, redundancies dominate Labor's first budget

The McGowan Government has abandoned a key election commitment just months after coming into office, slugging businesses with higher taxes in its first state budget despite promising not to.

Big businesses will see their payroll tax bills rise, while gold miners will also be slugged with higher royalties as part of Treasurer Ben Wyatt's attempt to bring WA's budget back to surplus by 2021.

WA budget at a glance:

State debt to peak at $43.78 billion in 2019/20

Current year deficit up to $2.3 billion, from a forecast $1.5 billion

3,000 public service redundancies

Royalties for Regions axed in current form

Hikes to gold royalty rate, payroll tax

Thousands of voluntary redundancies will be sought from the public service and an axe will be taken to the Royalties for Regions (RFR) program as part of substantial spending cuts, but it is not predicted to be enough to stop the state's debt rising to $43.8 billion by 2020.

WA's budget is predicted to be $2.3 billion in the red this financial year, with deficits above $1 billion predicted each year until a forecast return to surplus in 2020-21.

Premier Mark McGowan insisted revenue write-downs had left him with no choice but to break his pre-election pledge not to increase taxes, lifting payroll tax on companies paying employees more than $100 million per year.

"We are sorry about that, I am sorry; it hasn't been easy," he said.

Companies paying employees between $100 million and $1.5 billion will see their payroll tax rise to 6 per cent, while those above that level will pay 6.5 per cent — although the Government insisted that the rise would only last for five years.

The hike is expected to impact around 1,300 businesses operating in WA and raise $435 million over four years in the process.

Redundancies to save $300 million

Mr Wyatt announced 3,000 voluntary public sector redundancies to would deliver a saving of more than $300 million, but he insisted this would not impact frontline services.

Meanwhile, in a move sure to spark a backlash from the mining industry, gold producers will face much higher royalty charges in a move designed to raise nearly $400 million over four years.

The Government has also risked angering regional WA by shifting hundreds of millions of dollars in regular expenditure into the Royalties for Regions fund.

That means instead of funding additional regional projects as it was initially designed to, RFR will now be used to pay for ongoing costs related to health, water, sewerage and Labor's election commitments.

Households have been spared from further direct pain, after significant hikes to fees and charges were announced earlier this year.

Mr McGowan said the budget was an effort to get WA's finances back onto a sustainable footing after years of multibillion-dollar deficits, including a record $3 billion deficit last year.

"It's about striking the right balance between delivering on our election promises, creating new jobs and getting the state's finances back onto a sustainable direction," he said.

"I wanted to protect struggling families, and small and medium businesses."

Liberals attack 'budget of betrayal'

WA Opposition Leader Mike Nahan labelled it "a budget of betrayal".

"The McGowan Government promised not to increase taxes or add new taxes," Dr Nahan said. "They add a billion dollars worth of taxes.

"He also promised not to reduce frontline services and there are substantial reductions … he also promised to reduce debt. Debt goes up by 30 per cent."

A new gambling tax will be brought in, affecting internet-based bookmakers who have avoided the same levies as the TAB by basing themselves in other jurisdictions.